Mining tax buried by Senate deal

Mining companies and coalition members were jubilant yesterday as the
Mineral Resources Rent Tax (MRRT) was repealed in the Senate, after years of
bitter opposition.

Since the MRRT was
introduced by the Labor government 2012 mining lobbyists argued the tax was
highly complicated and discriminatory as it focused on iron ore and coal miners
of a certain profitability level.

However, the tax included rules
that allowed miners to use prior capital spending as a tax deduction, which
ensured few companies made payments.

The Coalition government
dismantled the arm of the Australian Tax Office which dealt with the tax
earlier this year, in anticipation of the repeal, and ceased pursuing companies
for the tax while it was still in legislation.

Prime Minster Tony Abbott said the repeal fulfilled a core election
promise, however the bill also included delays to the compulsory superannuation
contribution increase of 12 per cent, representing a broken election commitment
to refrain from adversely changing super policy.

Abbott insisted the change was not adverse, and repeated the refrain “If
workers want to make extra contributions to their superannuation, they can.”

Social welfare provisions remaining in the amended MRRT repeal
legislation include the schoolkids bonus (now to be means tested and available
to families on less than $100,000 per year); the income support bonus (to
remain in place until the end of 2016); and the low income super contributions
(to remain in place until the end of FY17).

“The whole process around the MRRT underscores the need for tax reform
to be undertaken properly, rather than through ad hoc measures, and with the
clear goals of ensuring governments have sufficient revenue for the future
while creating an environment that supports jobs and investment,” Westacott
said.

However, the business leader said the removal of the tax would make
Australia a more attractive investment destination, and would assist growth in
the resources sector.

Removal of a discriminatory tax

The South Australian Chamber of Minerals and Energy (SACOME) welcomed
the MRRT repeal this morning, claiming the tax was unfair and inefficient, and
discriminatory against the South Australia due to the vast amounts of magnetite
ore in the state.

SACOME CEO Jason Kuchel said the chamber lobbied against the MRRT because
of the additional beneficiation required to export magnetite ore, compared to
hematite ore found in the Pilbara which requires less processing, and a lower all-in
operating cost per tonne.

“SACOME believes mining companies pay their fair share of taxes and
royalties through the various state and federal systems already in place; in
South Australia this can be as high as 45 per cent,” he said.

The Minerals Council of Australia (MCA) chief executive Brendan Pearson congratulated the Coalition,
Palmer United Party and cross-bench senators for finding common ground
necessary to pass the MRRT repeal legislation.

Pearson said the MRRT added an unnecessary third layer of payment, on
top of State royalties and Federal company
tax.

These two instruments alone are estimated to have raised $40.3 billion
in the two years to June 2014 according to new estimates by Deloitte Access
Economics,” MCA said.

“This is on top of a record figure of $24.5 billion in 2011-12.

“And it is despite the fact that commodity prices have fallen by 50
per cent or more in the case of iron ore and coal in the last three years.”

Pearson said that revenues from company tax and royalties have
totalled more than $156 billion over the past ten years ($62 billion in royalties; $94 billion in company tax), and that the company
tax has tripled, from 8 per cent to 25 per cent.

He also argued that Australians did not need the MRRT to share in the
benefits of mining and the economic boom of recent years, according to a Reserve
Bank of Australia research paper released last month.

“The authors found that by 2013 the mining boom had raised real per
capita household income by 13 per cent, increased real wages by 6 per cent and
lowered the unemployment rate by about 1.25 per cent,” he said.

PUP plays with the big dogs

Only hours after maintaining he would not support the bill, Clive
Palmer and his Palmer United Party (as well as motoring enthusiast Ricky Muir) struck
a deal and flipped for the government once again to enable the amended MRRT
repeal legislation to pass through the upper house.

In a letter to Palmer, finance minister Mathias Cormann said “The
government appreciates the very constructive approach taken by the Palmer
United Party in helping to remove the mining tax in a fiscally responsible way.”

On Monday Palmer said the bill would not pass through the Senate without
the low-income superannuation contribution, income support bonus and schoolkids
support bonus.

However, Palmer had already dropped his interest in the welfare
payments for children of deceased war veterans, for which he adamantly campaigned
earlier this year.

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